Listen: Cargojet sells 777s, ANA buys NCA

In this week’s episode of the “Cargo Facts Connect” podcast, Cargo Facts Editor Jeff Lee and Associate Editor Robert Luke discuss the highlights of the International Society of Transport Aircraft Trading (ISTAT) Americas conference, which featured a session on the cargo market and another on mergers and acquisitions among lessors . Luke and Lee also talk about Cargojet selling two of its 777-300ERs , ANA acquiring NCA , and Canadian North adding two ATR 72-500Fs to its fleet for Arctic operations. Tune in for a discussion of these topics and more for the week ended March 10, 2023. A transcript is available below. This transcript has been generated by software and is being presented as is. Some transcription errors may remain. Robert Luke Hello and welcome to this episode of cargo facts Connect, the podcast of cargo facts, the newsletter of record for the air cargo and freighter aircraft industries for over 40 years. I'm your host Robert luke, associate editor of cargo facts. Jeff Lee And I'm Jeff Lee, editor of cargo facts. Robert Luke It's the end of the week, Jeff. And I'm just returned from the International Society of transport aircraft trading, Americas event that has taken place in San Diego. And there was some very interesting discussion topics specifically the freight around that took place at the m&a lessors panel discussion, I saw and heard some very interesting information that came from that group, as they primarily focused on the outlook of acquisition and mergers. And I thought that was very interesting for a few reasons. One, we got an in depth look at what it is they do strategically, when they decided that they either need to merge and acquire another asset, or just pretty much stay in their lane. Many were very concerned that, you know, the market was being narrowed down to an oligopoly because of the recent mergers that took place between the Carlyle Group and Cheung Kong asset holdings, when they acquired that AMC Kay aviation portfolio of 125 narrow body aircraft. And in addition to that, when SMB C acquired go shark management, but what I came away learning was that those were just basic investments, they needed to strengthen their portfolio, as a lot of them have been looking at future investment opportunities. And from my understanding, there's a genuine interest that's now being provided for the freedom market segment, although it wasn't specifically disclosed. Other panel discussions alluded to that as lessors have become more in tune to what's going on in the free market side, primarily with the assistance of the historical booster in the pandemic. But just going forward knowing that, you know, there's going to be a strong demand as a lot of the freighters are due for retirement. But back to the least panel. I think there was some very, very interesting and insightful in depth knowledge that was shared. But one of my favorite panels, of course, was the cargo panel. There was a lot of things that I came away very impressed with. And there was a universal theme and language that's being shared by everybody right now where they're not very concerned about any more further downturn about the market. In fact, if you have been listening to our recent podcasts that we've had lately, as well as the articles that we've written recently, you'll come to know that everybody's investing for the long haul, and they're revamping their fleets with renewals of new conversions and production builds, to replace the soon to be expiring, older freighters that have been due for retirement in the near future. But some of the interesting points that I want to focus on was discussed and in the actual cargo panel with Atlas, Chief Commercial Officer, Michael Steen, he noticed something very interesting here where he said, the 747 in production with the last one being delivered to Atlas just a few months ago, is going to create a void in the industry, specifically focusing on the functionality of the nose loader, which I thought was very interesting, because if you think about it, and there is going to be another aircraft of that type capable performing that operation. And if we look at the volumes and the carrying capacity, and the fact that you know, out of these 600 owed afraid is 120 of them, which will mostly consist of the seven fours or mbls and abs and a few other older 747 I'm sorry, eight 300 freighters data and do for retirement 120 of them are going to be gone within the next five to 10 years. And looking at the limited supply of GE stock right now, even just for the slotted replacement, triple seven 300 ers and the fact that the triple seven, eight s have not even been unleashed yet. And the APFSDS also have a few more years to go before they start their production run. There's going to be a lack of supply. And Mike Osteen even referred to that as possibly being similar to what we experienced in the pandemic. So, I think based on the universal theme and in the mindset of not just him but ATSG and various other operators in the industry. They are ramping up Even DHL, which has been accumulating assets left and right. You know, they're preparing for this situation as best as they can to try to mitigate and be proactive. I do have to give a shout out to risk Corrado and Michael Berger and the rest of the ATSG. Team for one, putting on a great display there as well at the cargo panel. Risk, Corrado was very confident and recently announced that of the 38 330 freighters that they have committed to in conversion orders and slots. 20 of them already been confirmed with deposits and agreements. And this line is expected to run until 2028. So I just think that is amazing. In the midst of what everyone is concerned about, and are saying is a downturn turning soon to become a recession. The basic operators and managers and less sores in the industry are zigging when everybody else is zaggy. For it for lack of a better term. So with that being said, I will transition to some other news that happened this week, are one of the bigger cargo operators in Canada cargo jet, has agreed to release the triple seven 300 Drs. And I'm gonna let Jeff kind of speak on this further and just to bring the intellectual data from our walking air cargo encyclopedia in infamous editor of knowledge here and to play to describe this further. But we're gonna have a little discussion session as he kind of reveals more details regarding this. So Jeff, what are your thoughts shared effects? Jeff Lee Yeah, so I mean, I, I have to say this did come as a bit of a surprise, because, you know, cargo jet, only bought these three triple seven 300 ers last year, these ex ante had frames, and they were basically getting ready to send them off to iei for conversion. And we know they had four slots for triple seven 300 arsf slots, and they had bought three. But now they are saying that they are in, but they've basically signed an agreement to sell two of these. And a kind of interesting side question is Who did they sell these to? Now we know they bought these from Ultimate leak out the secrets? Well, it's not a secret that they bought them from out of air, I guess. But you know, who we we've been wondering who they've been sending it through? And there's also a question of, you know, the push and pull factor because, yes, cargo jet wanted to sell these off. But also know, what about from the whoever purchased these? Was there? How much of the pool was there from that side of the equation? Interesting questions. I think this is also something you picked up on, is that the dynamics with the triple seven 300 era are changing. They're interesting, because with the manufacturer delays on the wide body programs, vessels, operators, I mean that there's now actually more demand for the large, existing lightweight bodies, like the triple seven 300 yard or passenger service. And so you know, that it's, Robert Luke it's really unfortunate, you know, just to kind of, you know, plug in real quick here, and I'll let you continue, but it's really, I don't want to say unfortunate, I'll retract that, but it's really intriguing is a better word for it. You know, at one point, the passengers were on their way out, because production from the playmakers the manufacturers, both Airbus and Boeing were were pretty much on on schedule. But just just look at what happens when supply chain logistics creates a little snag. And now all of a sudden, those expected new passenger replacements are on extended delays, just like the conversions were a couple of years ago, or even as recently as last year. And it's gotten to the point where the operators, the existing feedstock for conversion are like we're holding on to these and we have to keep these until we know we have our replacements on the way and not just by verbal, my verbal commitment, but actual physical presence sitting in front of our tarmac, it's here now, these triple seven 300 ers can go. So just, you know that very, very intriguing, but I'm sorry, Jeff Lee because I think that the past few years there, nobody predicted how strongly the passenger market would bounce back and so you know, the They were thinking that the triple 700 Er was, well, there was going to be a much reduced demand for this large passenger wide body, which then affected its prices. But then, and actually, at the time, smaller wide bodies, like the 330, then became actually very much in demand for passenger use as well. And now we're seeing back, come back to the triple seven 300. And so, you know, what, kind of how much Paul was there? And what kind of price did they get to sell these back. But so they, they, they had four slots with a, they have now deferred, the one of those slots to 2024 25. So that would be thinking deliver redelivery, for now at least have one triple seven, 300 vrsf, in sort of around mid 2025. They've sold to and they've also deferred one indefinitely. Robert Luke Just from, you know, I'm gonna just chime in real quick, here's some things that just came to mind. And I'm not saying this is accurate. So please don't take my word for gold. But when the delays occurred, right, it even with the conversion order, probably pushed back, whoever, you know, was the financier of this behind cargo Jack, obviously was not going to wait a couple of years before they can start paying on it. So that could have been what prompted them to move forward with the selling of the two triple seven 300 ers. But there's also a potential benefit in this because if they're now deferring their conversion orders to an to a later point, because obviously, what we're learning also, Jeff is that most of these operators less or what have you, when they're signing up for commercial slots, they don't just sign up for one or two, they do it in bundles of 10 to 15. And they want to know that they have the feedstock to keep rolling it in because it helps to streamline expense and revenue, it helps to streamline expense while they maximize revenue. So this could actually work out in cargo jets favorite because once the replacement aircraft do get online from the passenger sector, and they start to roll out, then guess what happens now the triple seven 300 ers become available and mass upload. And now you can get them probably at a cheaper rate than what you initially paid for. So this is something to think about from from a different perspective, what Jeff Lee went into the decision, probably, they realized they could get a good price to sell them now. While things kind of stabilize on the cargo front. And well, and in doing so they get to free up some money that they can pay off that Smith and you know, maybe in a couple of years, they'll be able to purchase feedstock at an even better price than they did for these ones. So yeah, difficult decisions. But and just very complex dynamic there. But also interesting is that the the are going ahead with the triple seven, because let's remember that the large minority segment is completely new to them. They only have 76 sevens right now. And they were going to go in, expand into the large wide body with both the triple seven 203 100 era convergence. Now, so now they're simplifying that somewhat by just only going ahead for now, and then immediate short term going ahead with the triple seven 200 hours, that they're converting with malice, and that they are going to be flying for DHL as part of that agreement that they expanded agreement that they announced last year. So yeah, they for now, they're still expecting those four triple seven 200 LRMs. And those will be coming. The first one will be coming early next year. Robert Luke In essence, probably not a bad way to start themselves off into the large wide body because if there's any frame that's close or has some sort of similarity to the seven, six, it wouldn't be the triple seven as 200 versus the 300 Er, so they get indoctrinated into the new airframe. But on a smaller scale that's kind of in a in a not so small way but close enough. Similar to the current airframe, they work on the medium twin engine now why body seven sixes Jeff Lee Yeah. And well and then on the opposite end of the spectrum, they are still getting more narrowbodies in the form of 757 conversions. So they they are still growing pretty significantly just going to be I put in a hold on the largest platform. But now Robert Luke what I want to do is if I can plug this in real quick, I did forget to mention this when I was talking about Iset. But I do want to think I'm in Cronin over at AOL work for stopping by and chatting with us. And I want to give a shout out to our cargo FX consultants, crew. New member Anthony galana. Welcome aboard. Glad to have you. It was a pleasure meeting you and say Diego looking forward to doing many wonderful projects and working together on some growth and development of the cargo FX brand. And definitely Guillermo ciovo, he's soon becoming a dear friend of mine, very humble young man. He's aspiring with the, you know, passion to pursue and pursue with excellence in this field. And he's very, very, very knowledgeable. I would say he's close to Jeff, but he's a definite second. So you know, that being said, thank you guys. It's wonderful. It was wonderful hanging out with you. And I look forward to not only attending more events with you, but working with you in a closer capacity. I also want to give a shout out to BART my two suites over at Ailis group and thank you, Tom Crabtree, you were wonderful on the emanate. I'm sorry, you were wonderful on the cargo panel. Let me get the correct panel right here. I appreciate your insight. And you were very informative. But you were humble enough to stop by and say hello to us and spend a few minutes of your busy schedule to just impart in us some wisdom and knowledge and we are sincerely appreciative of that. So thank you. Thank you. Thank you, gentlemen. Okay, Jeff, please continue Jeff Lee now. Yeah, no. So the other major development from this week, of course, also concerning large white bodies, but in Japan, where he and a group announced that it will be acquiring Nippon cargo airlines NCAA. Now, there's a lot to say about this. But the thing that jumped out to us was that through this deal, you ama now jumps to within the top 10. And actually top five combination carrier groups globally, in terms of free to fleet. That's amazing, right? Because they NCA has 8747 Dash states that they operate, and 77474 hundreds that they that they don't operate. So we didn't include this the seven 400 apps. But even with that, in combination with the end of the, which consists of two triple seven EFS and 976, sevens, that mix of production and convergence, but that basically takes them to 19 fritas, which is you have to say, given the size of the AMA group, before they steal, it always seems like they were their large reader fleet was a bit lacking with just the two triple sevens. Now the 976 sevens, obviously, they have a pretty substantial injury Asian network with those. But now, with this acquisition, they, there's a lot more for them to play with, with the 747 sheets, and yes, they previously had some kind of agreement with NCAA, but now that they're going to be fully under the ENA umbrella, that does give them a lot more capacity to do to play with and, you know, they can take advantage of all sorts of things with with the long haul and the intra Asia operations and all that. But you have to wonder with the 767, delete some of those getting near, I would say replacement or retirement age to the right. So I wonder what will happen to that sleep, particularly because NCAA also operates right now at least those seven, four sevens. Indonesia, from Japan to places like Singapore, Hong Kong and China. And so there's a bit of overlap there with this with the EMA seven, six sevens. What will we see happen? What is going to change? We don't know. Another question is will they keep those two AOC separate? I don't know. But Robert Luke in addition to that, I mean, who's to say that they are even planning to operate the seven floors. I mean, it's really never been in their wheelhouse. You know, so what's the game plan? I mean, is this an opportunity to acquire assets that they can flip for sale and boost up capital to really get what they want? You know, I mean, we don't know what's going on inside the board meeting room. But these are definite questions that you know, come to mind. Jeff Lee Right. I mean, if you ask me, I think, I think they will be keeping those seven, four sevens. And I actually think that they will keep the two way overseas. So, you know, the basically, the only thing that would change is the the ownership. Because ena, the inner group, has various other airlines, and AOCs. You know, like the low costs AOC and the regional. So, yeah, I think I would guess that they are going to keep the the NCAA OSI separate. But they will most likely keep the dashes because there is a value to them. And, of course, the there's a whole long whole network, free to network that they now have, with just the two triple sevens, they had a pretty small, inter continent long haul operation in Largo, and Frankfurt, and I believe, but you know, now in the end, there's a whole new set of operations that they can take advantage of. They are growing, they're loaded with the body fleet. You know, they have the two, triple seven cache that they've ordered, that are coming, you know, 2728. Yeah. Another question is, what what is NCAA eventually want to do with those 747 400? I don't know. I don't know the answer to that. But yeah, we may see some down some of the plans for those replacements. We shall see. But, yeah, this was a pretty major deal. And it means an AMA will now be in the top five or six, combination cannery groups by active reactivity. Robert Luke And it alters the landscape in a tremendous way. Because, you know, going back to that remark, I made earlier question rather, you know, who were their competitors? What routes are they going to be putting placing these on, in addition to what they're currently serving? And, you know, from a competitive standpoint, who's taken note of this, how does it change their strategy, and being able to serve that Asia Pacific region, you know, because they just basically, that put the put the rest of that region plus US carriers that were delivering a lot of goods in and out of that region on notice. Like, okay, you guys used to probably see us a small budget started to triple sevens. But, you know, the dynamics have definitely changed since then, after this acquisition has been finalized. So Jeff Lee right, yeah. So yeah, the the basically now much closer to the other, or some other Asia Pacific combination carrier groups like Cathay Pacific, Korean Air and China Airlines. And of course, Korean Air is in the process of merging with Asiana, which also has a return fee of its own. So we don't know well, pending Robert Luke final approval, they still have a little obstacle to hurdle over. But yeah, that's the that's their, that's their ultimate goal, Jeff Lee we will have to see what happens with that combined free to fee. But that would push up the numbers a bit as well. But Kathy is right now. Cafe is way up there. Because, of course has the air Hong Kong brand as well. Robert Luke So according DHL, yeah, yeah. So, Jeff Lee I mean, these are all and interestingly, most of the top 10 combination carrier groups with free, active free to fleets in the Asia Pacific region. And you know, ens jump just solidifies that. Robert Luke Looking at that 400 fleet, the 747 400 Let me clarify specifically, how much life do you think has those aircraft have if the typical average lifespan is about 35 years? Thank you, Michael steam for confirming that. Over at Atlas. How much time do you think they have with those 747 400 As before, they've got to make some retirement decisions. Jeff Lee Not quite yet. First of all, I mean, those are production Free to so they there's been I mean, they offer pretty good value proposition. And those are well for those are operated by at this air currently, as part of a an agreement that and NCAA basically created this logistics subsidiary called plus logistics, which is behind the marketing of the capacity of the those aircraft. But no, I mean, I think they'll still be around for at least five 510 years. Robert Luke Okay, well, they still got some time left nonetheless. Good. You know, Jeff, I think it's time to do a quick transition and go from down to the regionals. Yes. So there was some about that. There was another interesting piece of news that broke out at I start, Canadian North has officially put into operation, its first two ATR seven V tubes, and these are going to be ATR 72, Dash 500 F, and they've already been registered. They're ready to go. But here's the interesting thing. You know, there's, you know, us at Cargill facts, especially Jeff, Jeff has definitely taught his associate editors very well, you don't just settle for the release of news, you go find out what the real news is all about. So after being able to finally get through to Canadian north, we've, we were able to confirm that both aircraft are being fitted with unique equipment necessary to fly in the high Arctic. And we'll be ready for operations this month. That's cool. I hope those pilots Jeff Lee corrected yourself because I was gonna say they they aren't in operation yet. Right? You, they've, they've taken on and added to their fleet, these two aircraft, they haven't actually started flying them yet. Robert Luke That's why I said ready for operations this month. I had to kind of circle that back around. But thank you for confirming that. So yeah, I hope the pilots have their wet suits on because it's going to be some rigid, some frigid temperatures that there'll be flying into it. That's interesting, because if I'm not mistaken, you know, they do have some 737 304 100 Combi aircraft. Now they're going turboprop. So that's very, very unique. But uh, I think that's going to be kind of fun to keep an eye on what do you think, Jeff? Jeff Lee Yeah, it's, well, first of all, Canada just generally, has seen almost an explosion in the in its freezer feet. Both on the whiteboarding side, of course, with cargo jet and now in Canada, but also, you know, on the regional side, with Canadian north and several other carriers are taking ETL fleets. And I think that this feeds into what ECAA told you, in San Diego about just kind of the potential of the Canadian market for these regional breeders. And yeah, I mean, I think the other thing about Canadian north, is what's going to happen? Or what are they thinking in terms of those older classics? And the commies? The it's, they're not the only carrier with these older seven, three sevens in Canada. Robert Luke Yes, Jeff, it's very speculative right now. Thank you for planting those seeds of additional thought and, and forward thinking as we try to understand what their next strategical movement will be. But it is going to be interesting. I've always had an interest in seeing, you know, especially when you used to see some of the Canadian cemetery 1700s with the skis on on the on the landing gear flying into those extreme cold temperature regions. And, you know, it's just amazing to see that type of operation being conducted, and then doing it consistently because that is just not my element. I couldn't see me, you know, taking on that challenge. I'm not, I'm not a coder. I'm not acclimated to the code like that. But you on the other end, probably on point. So, yeah, and you wouldn't have any problems handling that. So congratulations to Canadian. We look forward to seeing more exciting things happening. And on that note, that's all we have time for today. For more multimedia coverage like this search cargo facts connect on iTunes and Spotify and search cargo facts.com. Thank you very much everyone for tuning in and join us again next time. Subscribe to Cargo Facts Connect on iTunes or Spotify , or download the episode on Transistor . Cargo Facts Asia, the essential event for stakeholders in Asia, will take place in person April 17-19 in Singapore. Register today to take advantage of early-bird pricing.

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